Angel Investor

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An angel investor is a private investor who provides capital for entrepreneurial start-ups or expansion. An angel investor acts alone or as part of a syndicate. An angel investor participates in the equity of the company by buying stocks or convertible debt instruments. The holding period is usually less than ten years. An angel investor usually operates a referral system to screen prospective ventures. Compared to a venture capitalist, an angel investor takes bigger risks and expects to make larger profits by investing in start-ups. An angel investor tries to minimize risks by restricting investments to familiar industries closer home. Also, syndicates allow an angel investor to diversify, spreading risk over multiple enterprises. Unlike a venture capitalist, an angel investor often has business experience relevant to the industry sector, adding value to the new venture and takes an active role in managing the company. Angel investor participation may not be suitable for entrepreneurs who are averse to such active managerial or advisorial involvement.